Does the Checkersrallys Development Agreement prohibit franchisees from having an undisclosed interest in a Competitive Business?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
You therefore agree that, during the Term and any successor franchise term, neither you, any of your Owners, nor any of your or your Owners' Immediate Family will (without our prior consent, which consent we may condition or withhold for any or no reason):
(a) have any direct or indirect controlling or non-controlling ownership interest as an owner – whether of record, beneficially, or otherwise – in a Competitive Business, wherever located or operating (except that equity ownership of less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
(b) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating;
(c) divert or attempt to divert any actual or potential business or customer of any Checkers or Rally's-branded restaurant to a Competitive Business; or
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, franchisees are restricted from having certain ownership interests or performing services for a Competitive Business during the term of the franchise agreement. Specifically, without prior consent from Checkersrallys, a franchisee, their owners, or their immediate family cannot have a direct or indirect controlling or non-controlling ownership interest in a Competitive Business. However, an exception exists for equity ownership of less than 5% in a Competitive Business if its stock is publicly traded on a recognized United States stock exchange.
This restriction also extends to performing services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business. Furthermore, franchisees are prohibited from diverting or attempting to divert any actual or potential business or customer of any Checkers or Rally's-branded restaurant to a Competitive Business. These covenants are in place to protect Checkersrallys's market position and prevent franchisees from using confidential information or resources to benefit a competing business.
These in-term covenants highlight the importance Checkersrallys places on franchisee loyalty and commitment to the brand. Prospective franchisees should carefully consider these restrictions and ensure they do not have any conflicting interests or business activities that could violate these terms. It is also important to understand that obtaining consent from Checkersrallys to engage in any of these activities is at the franchisor's discretion and may be conditioned or withheld for any reason.